What you’ll learn:

The Chancellor Philip Hammond has unveiled his last scheduled Budget before Brexit, promising that “the era of austerity is finally coming to an end.”

The Budget was announced earlier than usual this year so that it didn’t clash with final negotiations in the run up to the UK’s departure from the EU next March. The Chancellor warned that the Spring Statement could be upgraded to a “full fiscal event” if necessary.

He said that the future would be “full of change, full of challenges and full of new opportunities” and pledged to set aside an extra £500m for Brexit preparations.

We’ve set out some of the key Budget announcements below, starting with the measures which affect our personal finances.

Bear in mind that tax rules can and do change, and their effect on you will depend on your individual circumstances, which can also alter over time. Remember that investments, whether in an ISA, a pension, or otherwise, can fall as well as rise, and you might get back less than you initially invested.

Income tax

The personal allowance - the amount you can earn before you must start paying the basic rate of income tax - will rise to £12,500 in England, Wales and Northern Ireland from April 2019, a year earlier than planned. The personal allowance for the current 2018-19 tax year is £11,850.

The Chancellor described the higher personal allowance as a “tax cut” for 32m people and claimed it would put £130 in the pocket of a typical basic rate taxpayer.

The higher rate tax threshold will increase to £50,000 next April, again a year earlier than expected, up from £46,350 in the current tax year.

The governments of Scotland, where these changes won’t apply, Wales and Northern Ireland, may all vary income tax provisions, but above is the position set out by central government.

Individual Savings Accounts (ISAs)

The amount you can pay into a tax-efficient Individual Savings Accounts (ISAs) within a single tax year will remain at £20,000 in the 2019-20 tax year tax year.

This allowance continues to be available for use in cash ISAs and /or investment ISAs and /or Innovative Finance ISAs, which invest in peer-to-peer lending, or you can put up to £4,000 of your allowance into a Lifetime ISA. For example, if you have subscribed to a cash ISA and an investment ISA already, you can also pay into a lifetime ISA, but you cannot exceed the £20,000 annual allowance in total.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2019-20 will increase in line with Consumer Prices Index (CPI) to £4,368.

Pensions

The pension Lifetime Allowance, which is the maximum total amount you can hold within all your pension funds without having to pay extra tax when you withdraw money from them, will increase in line with the CPI measure of inflation from £1.03m in the current 2018-19 tax year to £1.055m in the 2019-20 tax year.

The pension Annual Allowance, which is the maximum amount of contributions you can make each year that attract tax relief, remains unchanged at £40,000 for most people. Depending on your personal circumstances, you may be entitled to a lower allowance. These remain unchanged, so check what you are able to pay into your pensions.

Capital gains tax (CGT)

The current CGT annual exemption will increase from £11,700 in the current 2018/19 tax year to £12,000 from April 2019, in line with rises in the CPI measure of inflation.

Housing and stamp duty

The Chancellor promised a further £500m for the Housing Infrastructure fund, to support the building of 650,000 new homes.

He said that first-time buyers using shared ownership schemes to buy a home costing up to £500,000 won’t have to pay any stamp duty. The rules will be backdated to 22 November 2017, so that those who’ve bought into shared ownership properties since this date will be eligible to claim a refund.

The government will publish a consultation in January next year on introducing an additional 1% stamp duty on overseas buyers of residential property in England and Northern Ireland.

A new Help to Buy equity loan scheme for first-time buyers only will be introduced in April 2021 and will run for two years until March 2023. It will replace the current Help to Buy equity loan scheme which is due to finish in 2021.

The Chancellor said that from April 2020, lettings relief for capital gains tax (CGT) would be restricted to properties where the owner is in shared occupancy with the tenant, to prevent it being used by owners not using the home as their main residence. There are also changes to the ‘final exempt period’, during which time the property qualifies for CGT relief regardless of whether the owner is living in the property at the time of sale. This will be reduced from the final 18 months of ownership to nine months.

Economic growth

The Office for Budget Responsibility (OBR), the Government’s tax and spending watchdog, forecasts growth at 1.3% for 2018.

The growth forecast for 2019 is 1.6%, 1.4% in 2020 and 2021, 1.5% in 2022 and 1.6% in 2023. In March, the forecasts were 1.3% in 2019 and 2020, 1.4% in 2021 and 1.5% in 2022.

Public borrowing

Government borrowing in the current financial year is forecast to be £31.8 billion in 2019-20, falling to £26.7 billion in 2020-21, £23.8 billion in 2021-22 and £19.7 billion in 2023-24, its lowest level in 20 years.

Debt as a proportion of GDP is expected to fall from 1.4% to 0.8% of GDP by 2023-24.

Inflation

Inflation is forecast to average 2.6% in 2018, as measured by the CPI, falling to 2.0% in 2019 and 2020.

The environment

The government announced a new tax on the manufacture and import of plastic packaging which contains 30% or less recyclable materials from April 2022.

It will also spend £10m to “pioneer innovative approaches” to boosting recycling and reducing litter, such as smart bins, and £10m on encouraging businesses to transition away from polluting plastics.

Health

NHS funding will increase by £20.5bn over the next five years. The Chancellor’s 10-year plan for the NHS will include new mental health crisis service including specialist ambulances and a hotline.

Technology

The Chancellor said the Budget would provide £1.6 billion in funding for science and innovation including investment in Artificial Intelligence, quantum computing, future manufacturing, and nuclear fusion.

He also pledged an extra £1 billion for the Ministry of Defence over the next two years to help it protect the UK against cyber-attacks and state-based threats.

Infrastructure

There will be a £28.8 billion National Roads Fund, paid for by road tax, to help pay for a new network of local roads and other larger road projects.

The Chancellor also promised to make an additional £420m available immediately to Local Highway Authorities to tackle potholes, bridge repairs and other minor works in this financial year.

Please bear in mind that this article is for general information purposes only. We do not offer personal tax advice. Tax rules can change in future and their effects on you will depend on your individual circumstances. If you are unsure about how any Budget measures could affect you, seek professional independent advice.

Remember, the value of investments can fall as well as rise and you could get back less than you invest. Seek independent advice if you’re unsure of this investment’s suitability for you.

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